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Marketers mull meaning of Comcast-Disney union

as comcast and Walt Disney Co. angle for advantage following Brian Roberts' initial $66 billion unsolicited bid for the "mouse house," marketers are left to wonder whether a consummated deal would result in price hikes on the combined company's media properties.

At a press conference last week Comcast promised, if successful in its bid, to elevate the status and revenue of broadcast network ABC, which could mean increasing the value and cost of its :30 spots, currently one of the cheapest broadcast buys in the business. The cable carrier also expressed interest in rebuilding the poorly performing ABC Family cable channel.

Stephen Burke, Comcast's exec VP, and a former Disney cable executive, said it would also consider merging ESPN with its own cable networks the Golf Channel and Outdoor Life. Both Disney and Comcast-which owns Style, G4 (a gamer's channel), CN8, Comcast SportsNet (for local sports) and a stake in the popular entertainment channel E!-are regarded as small-time cable owners. But combining their current assets and their greater ambitions would increase their holdings significantly.

However, some media buying executives cautioned that it is premature to speculate on how the deal will affect the price of advertising. "It gives us as marketers the ability to put together marketing plans that use a broad spectrum of offerings," said Marc Goldstein, CEO of MindShare North America. "Pricing is important, but this is about much more than just prices; it is about what these organizations will provide."

Previous media-consolidation moves are likely to have a more immediate impact on marketers than the Comcast takeover attempt. For example, the still-pending NBC Universal matchup, marrying General Electric Corp.'s broadcast and cable holdings with the cable and motion picture assets of Vivendi is expected to create fertile cross-platform packaging deals for advertisers, who have responded favorably to those nuptials.

Comcast is much more distributor than media owner, and its advertising revenue is just over $1 billion out of total revenue of more than $16 billion. The company has invested $15 million to build a national spot-sales team recently dubbed Spotlight, which sells local and national interconnect inventory on cable TV. Interconnects are a way of linking local cable systems so a national advertiser can easily buy across several markets. Although it is making inroads in local spot sales, this is a fraction of Comcast's overall business. The carrier sells two minutes of advertising for every hour of programming on every channel it carries in all 46 markets it serves.

"Comcast does not have an advertising revenue model," said Kathy Crawford, president-local broadcast at MindShare. "But Stephen Burke and [Spotlight President] Charlie Thurston are aware of the need for advertising to become a much higher priority in their lives."

Another advantage for Comcast, should Mr. Roberts pull off the deal, will be that it will get ownership of content for which it has paid dearly lately. A long-standing tug of war has been waged between the distributor and Disney's and Time Warner's cable channels. Mr. Roberts asked for reduced fees to carry those companies' channels; Comcast spends roughly $4 billion a year to fill its pipes with movies, news and sports.

hikes likely to continue

Michael Eisner, Disney's chairman-CEO, asked for a 20% increase annually for ESPN, roughly adding $2 a month per subscription, which Comcast is loath to pass on to its customers. Ironically, if Comcast owns ESPN, it will likely continue the increases, according to analysts.

"They will make the same price increases as the other MSOs," said Michael Gallant, a media analyst at CIBC Worldmarkets. "These are high-margin revenues, which Comcast would not want to drop. They would keep the fees high, push the price increase through to the customer and capitalize on them."

The deal would unite Comcast, the largest cable and Internet carrier in the U.S. with 21.47 million subscribers adding a steady stream of income to its revenue, with Disney, a content creator that has a balanced plate of subscriptions, box office and advertising revenue. The Comcast deal is a combination of a distribution system with content. As a result, it doesn't immediately strike a chord with everyone in the ad industry.

At the Association of American Advertising Agencies media conference in Orlando, Fla., last week, Irwin Gotlieb, CEO of WPP Group's media agency GroupM, drew an analogy between the Comcast deal and a comment by Sony Corp. CEO Nobuyuki Idei who once famously noted that Honda makes cars, but that doesn't mean they have to own highways.